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1. The LME is the world’s largest non-ferrous metals exchange and celebrated its 125th anniversary in 2002.
2. Its three main functions are:-
i. to provide a daily price for its metals which are relied upon worldwide by industry;
ii. to provide futures and traded options contracts that allow for prices to be locked in (this risk management function is known as hedging);
iii. and to act as a deliverer of last resort by authorising warehouses to store approved brands of metal. All contracts assume physical delivery but most are usually closed out before they become due - this being the 'insurance' aspect of LME contracts.
3. The use of daily "prompt dates" is an important difference between the LME and other futures exchanges. It is more commonly seen as a feature of 'over-the-counter', bilateral forward markets like the foreign exchange markets. It means that the Exchange combines the convenience, for trade users especially, of settlement dates tailored to suit individual needs with the security of a clearing house. After the 3-month date, the daily prompts for forward trading are reduced to weekly and then monthly contracts, out to 15, 27 or 63 months forward.
4. The daily value of contracts traded on the LME is approximately $8,000 - $10,000 million. Annually, trading volume on the LME is consistently around 60 million lots. This equates to an annual turnover of about $2,000 billion. Volume of business has increased ten fold since 1990.
5. A report by BI (formerly British Invisibles) in June 1999 estimated that the LME was responsible for invisible earnings of about £250 million a year.
6. The LME trades futures and options contracts in primary aluminium, aluminium alloy, copper grade A, high grade zinc, tin, primary nickel, standard lead and North American Special Aluminium Alloy (NASAAC). It also trades traded average price contracts (TAPOs) for primary aluminium, copper grade A, aluminium alloy, standard lead, primary nickel, tin, NASAAC and high grade zinc.
7. The Exchange introduced futures and options contracts based on an index (LMEX) of its six primary metals in April 2000, designed as an investment vehicle. The LMEX contract provides one single liquid reference point that tracks the performance of the world's most traded non-ferrous base metals contracts. "The LMEX contract provides an excellent vehicle for the fund and investment community. It gives access to our market without disruption to our core business of meeting the needs of the base metals trade and industry, which we continue to serve wholeheartedly.", The Lord Bagri, CBE, former Chairman of the London Metal Exchange said.
8. The LME launched its electronic trading system, LME Select in February 2001. LME Select is a member to member trading system where LME exchange contracts are traded and matched on a principal to principal basis. The LME Select screen is accessible only to LME broker clearing members but a huge amount of information about trading on LME Select is available in real time to all market users through the 50 or so information vendors who distribute LME data.
9. LME trading is conducted on LME Select and by open outcry on the trading floor, supported by a 24-hour inter-office telephone market. The first session of open outcry (ring) begins at 11:45am where each contract trades for a five minute period. This is followed by the second ring which gives rise to the day's official prices, and then the 'kerb' when all eight contracts and LMEX trade simultaneously. The second floor trading session begins at 14:55 and follows the structure of the first session.
10. The Exchange is a Recognised Investment Exchange (RIE). The chairman is Mr Donald Brydon OBE, the chief executive is Mr Martin Abbott and the executive director: regulation and compliance is Mr Diarmuid O'Hegarty.
11. The Exchange approves, but does not own, more than 400 warehouses in 12 countries globally.
12. More than 440 brands of metal from 65 countries are approved as ‘good delivery’ against LME contracts.
13. The London Metal Exchange Limited, which owns and operates the Exchange, is a wholly owned subsidiary of LME Holdings Limited.
14. Transparency of the market is very high with over 50 specific data sets issued throughout the trading day by more than 50 price vendors across the world.
15. On March 2002, the LME began trading NASAAC - its North American Special Aluminium Alloy Contract. With a modified A380.1 specification, the new aluminium alloy contract has been developed following intenstive discussions with all segments of the North American aluminium industry. It was approved in November 2001 and the first prompt date was 5 June 2002, with the first prompt month for traded options and TAPO contracts set for July.
Should you have any media related questions or require further information, please contact the LME’s press office on +44 (0) 20 7264 5555.
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